Written testimony to the United States Senate Committee on Energy & Natural Resources on the Financing of Renewable Energy and Low-Carbon Technology
FOREWORD BY MICHAEL LIEBREICH, CHIEF EXECUTIVE
In 2006, renewable energy and low-carbon technology industries set a record with more than $100bn worth of financing transactions. Of this, $70.9bn was new investment, an increase of 43% over 2005. The remaining $29.5bn consisted of mergers and acquisition activity, leveraged buyouts and refinancings of assets. As of March 2007, there is no shortage of capital available for new energy ventures and projects, either globally or in the US.
While the European Union remains the global pacesetter in overall clean energy investment, the US has demonstrated leadership in a number of areas, including venture capital and private equity. In 2006, the US took major strides toward closing the overall funding gap with Europe through a massive build-out of its ethanol sector and the addition of 2.5GW of new wind farms.
There are, however, areas in which the US lags. In particular the public markets, where – despite a number of high profile initial public offerings – volume of funds raised trails Europe, and the carbon markets, where the EU Emissions Trading Scheme is overcoming its teething troubles to establish a clear and convincing lead.
On a sectoral basis, the US has seen substantial investment activity in wind, biofuels and geothermal, but lags behind in other key areas of renewables such as conventional silicon-based photovoltaics, biomass, marine and mini-hydro. Investment activity, however, has not translated into a strong manufacturing base. Taking the broader clean energy industry, the US has strong programmes in “clean coal,” but lies far behind Japan in stationary fuel cells, hybrid and electric vehicles.
Looking ahead, the US is among the leaders in several technologies that could revolutionize the energy industry in the medium-to-long term, including thin-film photovoltaics and cellulosic ethanol. America’s outstanding research universities, its network of early-stage incubators, its ready supply of venture capital and its culture of entrepreneurship all bode well. Indeed, the growth of companies in these fields could help propel the US to the head of the pack in terms of overall investment.
To get there, however, the US will need sensible, transparent regulations and policies that assure investors of longterm returns from the sector. What investors require are clean energy policies that reduce unnecessary risk and allow for growth over the long haul. They seek ground rules which they know will remain in place for years to come. They appreciate policies that help reduce per-megawatt or per-gallon costs so that new energy technologies can
ultimately stand on their own, with little government assistance. They also look for policies that reduce risk and accelerate time to market.
This paper presents a brief look at each class of investment in new energy, ranging from venture capital and private equity, to project finance, to activity on the public stock markets. Along the way, it seeks to place the US within the context of worldwide clean energy investment trends. Finally, it highlights a handful of policy areas the committee
might examine as it crafts a solid regulatory framework to further clean energy growth in the US.
Michael Liebreich
CEO & Founder
New Energy Finance
Washington, DC, March 7, 2007
Please download the full report for more detailed analysis.